Question 1

Markets will always allocate resources efficiently.

Accepted Answer

A) True 
 B)False

Question 2

Suppose that the equilibrium price in the market for widgets is $5. If a law increased the minimum legal price for widgets to $6,

Accepted Answer

A)   the resulting increase in consumer surplus would be larger than any possible loss of producer surplus.
B)   the resulting increase in consumer surplus would be smaller than any possible loss of producer surplus.
C)   any possible increase in producer surplus would be larger than the loss of consumer surplus.
D)   any possible increase in producer surplus would be smaller than the loss of consumer surplus.

Question 3

Consumer surplus measures the benefit to buyers of participating in a market.

Accepted Answer

A) True 
 B)False

Question 4

Figure 7-22 
-Refer to Figure 7-22. If 40 units of the good are bought and sold, then

Accepted Answer

A)   the marginal cost to sellers is equal to the marginal value to buyers.
B)   the marginal value to buyers is greater than the marginal cost to sellers.
C)   the marginal cost to sellers is greater than the marginal value to buyers.
D)   producer surplus would be greater than consumer surplus.

Question 5

Scenario 7-2
Suppose market demand and market supply are given by the equations: 
-Refer to Scenario 7-2. How much is total consumer surplus at the equilibrium price in this market?

Accepted Answer

Total consumer surpl...

Question 6

Suppose Katie, Kendra, and Kristen each purchase a particular type of cell phone at a price of $80. Katie's willingness to pay was $100, Kendra's willingness to pay was $95, and Kristen's willingness to pay was $80. Which of the following statements is correct?

Accepted Answer

A)   For the three individuals together, consumer surplus amounts to $35.
B)   Having bought the cell phone, Kristen is better off than she would have been had she not bought it.
C)   Had the price of the cell phone been $95 rather than $80, Katie and Kendra definitely would have been buyers and Kristen definitely would not have been a buyer.
D)   The fact that all three individuals paid $80 for the same type of cell phone indicates that each one placed the same value on that cell phone.

Question 7

Table 7-2
This table refers to five possible buyers' willingness to pay for a case of Vanilla Coke. 
-Refer to Table 7-2. If the market price is $5.50, the consumer surplus in the market will be

Accepted Answer

A)   $3.00.
B)   $4.50.
C)   $15.50.
D)   $21.00.

Question 8

Figure 7-21 
-Refer to Figure 7-21. Which area represents consumer surplus when the price is P1?

Accepted Answer

A)   A
B)   B
C)   C
D)   D

Question 9

Table 7-12
The only four producers in a market have the following costs: 
-Refer to Table 7-12. If the sellers bid against each other for the right to sell the good to a consumer, then the producer surplus will be

Accepted Answer

A)   $0 or slightly more.
B)   $50 or slightly less.
C)   $150 or slightly less.
D)   $200 or slightly more.

Question 10

Figure 7-33 
-Refer to Figure 7-33. How much is total consumer surplus in this market at the equilibrium price?

Accepted Answer

Total consumer surpl...

Question 11

Figure 7-16 
-Refer to Figure 7-16. If the price of the good is $500, then producer surplus amounts to

Accepted Answer

A)   $450.
B)   $575.
C)   $700.
D)   $800.

Question 12

Welfare economics is the study of

Accepted Answer

A)   the well-being of less fortunate people.
B)   welfare programs in the United States.
C)   how the allocation of resources affects economic well-being.
D)   the effect of income redistribution on work effort.

Question 13

If the current allocation of resources in the market for hammers is inefficient, then it must be the case that

Accepted Answer

A)   producer surplus exceeds consumer surplus in the market for hammers.
B)   consumer surplus exceeds producer surplus in the market for hammers.
C)   the sum of consumer surplus and producer surplus could be increased by moving to a different allocation of resources.
D)   the costs that sellers of hammers are incurring could be reduced by moving to a different allocation of resources.

Question 14

The decisions of buyers and sellers that affect people who are not participants in the market create

Accepted Answer

A)   market power.
B)   externalities.
C)   profiteering.
D)   market equilibrium.

Question 15

Figure 7-22 
-Refer to Figure 7-22. At the equilibrium price, consumer surplus is

Accepted Answer

A)   $1,000.
B)   $2,000.
C)   $3,500.
D)   $500.

Question 16

Figure 7-21 
-Refer to Figure 7-21. Which area represents total surplus in the market when the price is P1?

Accepted Answer

A)   A+B
B)   B+C
C)   C+D
D)   A+B+C+D

Question 17

Total surplus is equal to

Accepted Answer

A)   value to buyers - profit to sellers.
B)   value to buyers - cost to sellers.
C)   consumer surplus x producer surplus.
D)   (consumer surplus + producer surplus)  x equilibrium quantity.

Question 18

If the current allocation of resources in the market for wallpaper is efficient, then it must be the case that

Accepted Answer

A)   producer surplus equals consumer surplus in the market for wallpaper.
B)   the market for wallpaper is in equilibrium.
C)   on the last unit of wallpaper that was produced and sold, the value to buyers exceeded the cost to sellers.
D)   All of the above are correct.

Question 19

Table 7-17 
-Refer to Table 7-17. Both the demand curve and the supply curve are straight lines. If 6 units are bought and sold, then total surplus is

Accepted Answer

A)   $18 lower than it would be if the equilibrium number of units were bought and sold.
B)   $22 lower than it would be if the equilibrium number of units were bought and sold.
C)   $26 lower than it would be if the equilibrium number of units were bought and sold.
D)   $6 higher than it would be if the equilibrium number of units were bought and sold.

Question 20

Figure 7-21 
-Refer to Figure 7-21. When the price is P1, area C represents

Accepted Answer

A)   total benefit.
B)   producer surplus.
C)   consumer surplus.
D)   None of the above is correct.

Exam 7: Consumers, Producers, and the Efficiency of Markets

Table 7-17 -Refer to Table 7-17. Both the demand curve and the supply curve are straight lines. If 6 units are bought and sold, then total surplus is

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Figure 7-21 -Refer to Figure 7-21. Which area represents consumer surplus when the price is P1?

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Scenario 7-2 Suppose market demand and market supply are given by the equations: -Refer to Scenario 7-2. How much is total consumer surplus at the equilibrium price in this market?

Correct AnswerverifiedTotal consumer surpl...View AnswerShow Answer

Figure 7-21 -Refer to Figure 7-21. When the price is P1, area C represents

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Figure 7-16 -Refer to Figure 7-16. If the price of the good is $500, then producer surplus amounts to

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If the current allocation of resources in the market for wallpaper is efficient, then it must be the case that

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Suppose that the equilibrium price in the market for widgets is $5. If a law increased the minimum legal price for widgets to $6,

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Markets will always allocate resources efficiently.

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Table 7-12 The only four producers in a market have the following costs: -Refer to Table 7-12. If the sellers bid against each other for the right to sell the good to a consumer, then the producer surplus will be

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Table 7-2 This table refers to five possible buyers' willingness to pay for a case of Vanilla Coke. -Refer to Table 7-2. If the market price is $5.50, the consumer surplus in the market will be

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Consumer surplus measures the benefit to buyers of participating in a market.

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Welfare economics is the study of

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Figure 7-22 -Refer to Figure 7-22. At the equilibrium price, consumer surplus is

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Figure 7-21 -Refer to Figure 7-21. Which area represents total surplus in the market when the price is P1?

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Figure 7-33 -Refer to Figure 7-33. How much is total consumer surplus in this market at the equilibrium price?

Correct AnswerverifiedTotal consumer surpl...View AnswerShow Answer

If the current allocation of resources in the market for hammers is inefficient, then it must be the case that

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Total surplus is equal to

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The decisions of buyers and sellers that affect people who are not participants in the market create

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Figure 7-22 -Refer to Figure 7-22. If 40 units of the good are bought and sold, then

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Suppose Katie, Kendra, and Kristen each purchase a particular type of cell phone at a price of $80. Katie's willingness to pay was $100, Kendra's willingness to pay was $95, and Kristen's willingness to pay was $80. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

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